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On Friday, July 9, 2021, the US Securities and Exchange Commission (SEC) indicted the Greek citizen Apostolos Trovias of selling “insider trading tips” (from 2016 to early 2021), including preliminary earnings reports , on the darknet. Trovias operated with the “pseudonymous avatar ‘The Bull'”, according to the SEC complaint. Trovias, whose last known address was in Greece, is again 30 years old, according to the lawsuit. Even so, throughout his activities on the dark web, he insisted that he be in the United States.
Trovias offered for sale trading information that he allegedly received from an employee of a large stock trading company. He also put sales and earnings reports for publicly traded companies up for sale before those reports were officially released. In two examples of the latter, the numbers The Bull sold were essentially correct (one example had an incorrect label on the number), but the lawsuit does not claim how Trovias obtained these reports. In addition, Trovias went to great lengths to seek help from some of its customers in setting up a website specifically for the exchange of inside information and began building it with the help of a third party.
Securities fraud and money laundering
In addition to the SEC lawsuit, on the same day, July 9, 2021, the U.S. Attorney for the Southern District of New York filed a grand jury indictment against Trovias for securities fraud and money laundering. In its press release on the case brought against Trovias, the SEC explicitly notes the support of the US District Attorney for the Southern District of New York, the Federal Bureau of Investigation and the Internal Revenue Service. More on the FBI and the IRS later.
Trovias offered various payment options. A single tip could be purchased at the “promotional price” of USD 29.95. Or a person could subscribe to a weekly plan for $ 99.95 or a monthly plan for $ 299. Pre-published earnings reports sold for $ 5,000 each. All payments had to be made in Bitcoin. The complaint states that the dark web is “a part of the Internet that requires specially designed software to access it, and is specifically designed to facilitate anonymity by disguising the identity of users, including by hiding Internet protocol addresses the user”. The complaint goes on to say that “the most popular dark web is The Onion Report (“ Tor ”) network.
The indictment contains more details about the dark web. “The dark web refers to websites that are not indexed by traditional search engines and to which access may be restricted to those using certain anonymizing browsers or computer settings.” The indictment alleges that Trovias used “online marketplaces” [on the Dark Web] enabling users to buy and sell illegal goods, including controlled substances, stolen and fraudulent ID and access devices, counterfeit goods, malware and other computer hacking tools, firearms and toxic chemicals; “and in some cases illegal services such as inside tips and money laundering.
The dark web
We have already written about using the dark web for securities fraud, see our blog post from March 30th, 2021, “Under the Cover of Darkness: Insider Trading and the Dark Web”.
When the average person thinks of the Internet, their reference point is the Surface Web, which is indexed by traditional search engines like Google or Bing. However, the Surface Web, which most of us use every day, makes up less than 5% of the Internet. Every activity you participate in on the Surface Web can – and most likely will – be tracked. Would you like to buy a tent and are not sure what to buy? It’s amazing how tent advertisements keep popping up while surfing.
Below the Surface Net, where legitimate personal and business interactions take place on a daily basis, lies the Deep Web, which sounds ominous but is really just the Internet location for protected information like medical records, bank accounts, government databases, and personal email, to name a few a couple. Typically, a person without passwords or authorization cannot access the information stored on the deep web. The deep web makes up approximately 96% of the internet. And in a small section of the deep web, the dark web exists.
The dark web is an intentionally hidden area of the internet – a dangerous area, known for illegal activity and unsavory characters, where a person can buy and sell anything completely anonymously. Forget about using Google or Chrome to access this neighborhood – you will need special software to gain access to the boundaries of this protected and uncensored space.
Ironically, the United States government developed the most widely used software known as Tor (“The Onion Router”) and released it to the public for free in 2004. Tor uses multiple layers of encryption (like an onion) to pass information through. to transfer indirect means to the ultimate destination, thereby preserving anonymity.
The lawsuit states: “Due to its dominant market share, the Tor network hosts the majority of the dark web marketplaces.”
Insider Trading Tips
So how did the SEC and the US attorney come across the nefarious operations of this Greek intruder on the dark web? The first “mistake” came in June 2017 when Trovias was selling a week-long plan to an undercover IRS agent on a Tor website. He then sold him a monthly plan and asked the IRS agent to confirm his stay in the US. In correspondence with the IRS agent, Trovias confirmed that he was operating in the US and received reports from his client that the information was profitable. In April 2018, a user contacted one of the Tor websites about Trovia’s posts on the site. This user was an undercover FBI agent. Trovias offered a monthly plan for $ 320, and the agent transferred that amount in bitcoin.
On May 1, 2018, Trovias began sending the agent daily insider tips, claiming the information came from “money managers and a market maker.” The complaint alleges that this statement was either false and misleading (because Trovias invented it) OR it was in violation of the law because Trovias knew that the statements violated a duty of confidence and trust for personal gain. The lawsuit alleges that Trovias “gave tips on buying or selling certain stocks directly to the IRS agent and the FBI agent” from June 16, 2017 through at least March 6, 2020. Trovias, in essence, admitted his wrongdoing when he wrote to the FBI agent on May 18, 2018 that his source is “very careful about the information leaking out to a lot of people.”
In addition to selling inside information to customers, Trovias publicly admitted to some of its customers that it was “working with some people” to trade on their behalf for a percentage of the profit. He also wrote to the FBI agent on October 14, 2018 regarding some of his insider tips, to say that he, Trovias, had been trading in the stocks of the same company that he had tipped the agent on four days earlier. Not satisfied with his subscription receipts, he decided to take advantage of the market opportunities his “inside information” offered.
Insider tips on the dark web
The lawsuit calls for a permanent cease and desist from Trovias’ activities and the surrender of all of its ill-gotten gains. The indictment calls for the conviction of the cited crimes (which one would expect with imprisonment) and the confiscation of all profits from his illegal activities. However, since Trovias’ whereabouts are unknown (see lawsuit, last known address in Greece) and it may be outside the jurisdiction of US law enforcement agencies, the outcome for Trovias is uncertain. Even more troubling is the associated apparent inability to determine the veracity of Trovias’ claims about the sources of the information he sold. If his claims about how he obtained the trading information and his unexplained ability to receive earnings notices BEFORE they are released are left unanswered, serious questions about the integrity of our capital markets will remain unanswered.
If you are offered classified information at a price, you have to ask what that says about the provider, the recipient and, above all, the marketplace. Here the answers remain enveloped in the blackness of the dark web.
© 2021 Norris McLaughlin PA, All rights reservedNational Law Review, Volume XI, Number 215
